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EFFECT OF  INNOVATION STRATEGY ON  PERFORMANCE OF COMMERCIAL BANKS IN KENYA


Karanja Ngugi

Lecturer, Jomo Kenyatta University of Science and Technology

Bob Karina

Managing Director and CEO, Faida Investment Bank

 

ABSTRACT

Innovation is considered to be a critical requirement for the growth and profitability of organizations. One of the ways to achieving growth and sustaining performance is to encourage and foster innovative practices and creativity internally within the institution. The objective of this paper is to investigate relationship between innovation strategies adopted by commercial banks in Kenya and their performance. Firm’s performance is the appraisal of prescribed indicators or standards of effectiveness, efficiency, and environmental accountability such as productivity, cycle time, regulatory compliance and waste reduction. The objective of the study was effect of innovation strategy on performance of commercial banks in Kenya. The author used descriptive research design Primary data was collected from 43 managers in commercial banks using both open ended and closed. Secondary data was obtained from annual reports, websites, journals and libraries. The study found that the banks employed environmental analysis and response to change, the banks employed aggressive anti-competitors marketing campaigns. It was clear that product innovations affected performance of Commercial banks. The study found that product replacement contributed to the bank's profitability, product repositioning contributed to the bank's profitability. The study found that process innovation strategies such as reduction of costs and conformance to regulations contributed to the bank’s profitability. The study revealed that technological innovations affected performance of commercial banks. Aggressive anti-competitors marketing campaigns contributed to the bank's profitability more. The study concludes that adoption of innovation strategies affected profitability of the bank. The study concludes that product innovations such as product replacement and product repositioning contributed to the bank's profitability. Product development was important in both the supply of the core product as well as in the support part of any offer. The paper concludes that adoption of innovation strategies affected performance of the bank to a great extent.


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